VideoWith the economy grounded and travel costs soaring, many companies would love to keep their employees home. But American workers continue to hit the road: This year, business travel will reach $110 billion, up from $103 billion last year.
There are new ways to cut costs, however, some of which take advantage of Internet technology and others that demonstrate the power of innovative thinking. Companies will combine these approaches differently depending on the size of their travel budgets, but businesses of all sizes can save substantially if they are willing to take a fresh look at how they acquire travel services.
Many companies are finding that the first stop on the journey to better travel prices is their employees' desktops. More than 20 percent of businesses surveyed by American Express Co. last year had implemented online self-booking tools, and another 44 percent planned to by 2003. The tools, which can replace long phone calls to travel agents, have been around for nearly a decade, but have largely gone unused because of the cultural challenges of implementing a new process, says Kate Farrell, director of global programs at the Association of Corporate Travel Executives, based in Alexandria, Virginia. But they have gained new life now that cost-cutting is a priority.
Cibavision Corp., for example, saves 10 to 15 percent on each airline ticket booked by employees using American Express's online travel booking tool, AXI. Cibavision faces a dilemma that many companies can appreciate: it wants to keep spending flat even though its travel volume will increase. Owned by Swiss firm Novartis and struggling to integrate newly acquired Wesley Jessen VisionCare Inc., which has operations in the United States (including Puerto Rico), Europe, and Canada, Atlanta-based Cibavision must inevitably do some globe-trotting.
"Obviously, we've tried to cut back on travel to the extent we can, and we send fewer people to conferences," says Tim Barabe, Cibavision's CFO. "But with the acquisition and efforts to consolidate sites, our travel volume has to increase."
Savings come from fewer phone calls made to the travel agency (and consequently lower fees), and from employees doing their part to keep costs low. "We're finding our employees are picking the lowest-price fares 9 times out of 10 now, versus only 50 percent of the time before we rolled out the self-booking tool," says travel manager Ron Sharer. Although the company policy has long mandated choosing the lowest fares whenever possible, enforcing that policy was much harder when the list of options resided with the travel agent. Now, employees must type in a note giving a reason for choosing an off-policy fare, which is then routed to a manager.
Such results are not unusual. "Some companies have reduced their average ticket price by 20 percent just by using corporate self-booking systems, and that's before they started reducing the number of travel services they were using," says Carol Salcito, president of Management Alternatives, an independent travel consultancy based in Norwalk, Connecticut.
Web Pros and Cons
With an estimated 70 percent of the market, the leader in this area is Sabre's GetThere, which sells the DirectCorporate and BTS products and privately labeled services such as Corporate Travel Online (which is resold by American Express). Competitors will attempt to differentiate themselves by offering more than a simple booking service, says Norm Rose, president of Travel Tech Consulting Inc. Recently launched Yatra, for example, can be programmed to rank itineraries based on how many more bookings a company needs to comply with supplier contracts, as well as by a traveler's title and trip purpose.
Self-booking tools have limits, though. Most corporate travel managers say multi-leg and international trips still require the human touch, and last-minute changes may inevitably have to go through an agent, at least until mobile Internet applications gain steam. And firms must still pay travel agencies to print the employee-booked tickets, although a few forward-thinking firms have decided to gain travel-agency accreditation so they can print their own tickets.
While many of these products use the Internet as an information pipeline, letting employees go on to the Web in search of great deals may not be a good idea. "Internet travel sites are the bane of travel managers' existence," says Scott Gillespie, a principal and the CEO of Cleveland-based Travel Analytics Inc. Ad hoc buying on the Internet gives companies no easy way to track spending or enforce internal policies, crucial elements in extracting better terms from airlines, hotels, and rental-car agencies. Plus, the one-time deals generally offer weaker discounts than a long-term arrangement would. A recent study by airfare research firm Topaz International Ltd. found that agency rates beat Internet fares by an average of 15 percent (or $90) per itinerary.
But for smaller companies, or those with extremely adaptable travelers, there is some evidence that they're worthwhile. With only six employees who travel regularly, Softpac Industries Inc., in Plymouth, Minnesota, dropped its travel agency earlier this year because the company's administrative assistant was skilled at gleaning low fares from travel Web sites, without the $25 per-ticket handling fee. "She can book tickets in the same amount of time she spent talking to the agent, and still get the best price," says company controller Sean Lawler. And Topaz's study found that Internet bargain hunters could beat agency fares by an average $175 per itinerary if they agreed to conditions like changing carriers midtrip and using alternate airports.
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